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By Julie Zhu
HONG KONG (Reuters) - China's Didi is in talks with state-backed Sinomach Automobile to buy a third of its electric-vehicle unit, two sources said, signalling the ride-hailer's regulatory troubles are in the rear view mirror as it focuses on growth.
The deal, if completed, would accelerate Didi Global Inc's strategic expansion in the world's largest EV market and help cushion the impact of the pandemic on its core ride-hailing business.
Scrutiny from Beijing for suspected violation of data security has forced Didi to pursue a delisting from New York and rein in its business but there are signs of a thaw. The Wall Street Journal reported on Monday that regulators are set to conclude their investigations into the company.
Didi aims to acquire shares in small-sized automaker Sinomach Zhijun Automobile from minority shareholders and inject new capital into the firm, one of the sources told Reuters. A stake of that proportion would cost Didi more than 1 billion yuan ($150 million), said the other source.
The talks for a stake in Sinomach Zhijun are in an advanced stage, the sources said. One of them said the two sides have given themselves time till the month-end to nail the deal, which will see Didi become the second-biggest shareholder of the EV maker after Sinomach Automobile.
The parent and its related entities own a combined 67% of Sinomac Zhijun, showed the corporate registry.
"The (reported) deal talks between Didi and Sinomach have sent positive signals to the market," said Zhang Zihua, chief investment officer at Beijing Yunyi Asset Management.
"Firstly, it means the regulatory crackdown which forced Didi to delist from the U.S. and banned its apps in China would probably come to an end. Secondly, being tied up with a state-backed automaker would also help Didi's relisting plans in the Greater China region in the future," added Zhang.
Didi shares, which have lost over 55% so far this year, were up nearly 4% at $2.31. They surged 8% in premarket trading after the Reuters report.
The ride-hailer has been quietly pushing ahead with a car-making project, code-named "Da Vinci", and, according to one of the sources, has about 2,000 people for it. It is eyeing partnerships with automakers that have an EV production license, which it needs to make such vehicles in China, the sources said.
Didi and Sinomach Zhijun did not respond to requests for comment. Nor did Shanghai-listed Sinomach Automobile, whose shares jumped by the 10% daily limit in afternoon trade on Wednesday.